Since I heard Bill Ackman talking about J.C. Penney Company, Inc. (NYSE:JCP) a few months ago, I started my research on the name. As you may already know from reading my blog, I am basically a bond investor and JCP’s debt caught my interest, even when the company had been performing poorly from an operational standpoint. I basically think that, given JCP’s real estate asset base, my investment will finally be paid in full. Nevertheless, I think management’s strategy lacks visibility (so far), so I could not feel as comfortable with JCP’s shares as I feel with its bonds.
Companies such as Dillard‘s, Inc. (NYSE:DDS) or Macy‘s, Inc. (NYSE:M) represent better stories and trade at reasonable multiples. While JCP will surely show negative EBITDA and net income numbers in 2013, a company like Dillard’s, Inc.(NYSE:DDS), which has been through a successful turnaround, shall be able to extend its three year streak of positive same store sales while directing its Capex and merchandising efforts in the growing footwear, accessories, and beauty segments (FAB). The company trades at 2013 6x EV/EBITDA and 13.9x P/E, and its numbers (top line and margins) are on the rise. Macy’s, Inc. (NYSE:M) is also an interesting case for those looking for some exposure to the department stores sector. For years the company has been showing good results through its significant exposure to FAB, good expense discipline, and consistent capital allocation. Macy’s, which trades at 2013 5.8x EV/EBITDA and 11.7x P/E, is a great comparison base for the whole industry.